TMI Blog2006 (7) TMI 523X X X X Extracts X X X X X X X X Extracts X X X X ..... ( ii )Mr. Abraham Chacko, Secretary ( iii )A. Vincent Alburquerque, Vice Chairman ( iv )Mrs. Pressy Alburquerque, Treasurer ( v )Miss Maria Pereira, Member ( vi )Mr. C.D. Menezes, Member The society was registered under section12A with the Commissioner of Income-tax under Income-tax Act, 1961, Bombay. The object of the society is to run various schools. The following schools were run by the society at various places in Bombay : ( i )St. Lawrence High School, Avadhoot Nagar, Bombay; ( ii )St. Luis High School, Rawalpada, Bombay; ( iii )St. Xavier s High School, Poonam Nagar, Bombay; ( iv )St. Xavier s High School, Saibaba Complex, Bombay; ( v )St. Lawrence High School, Chatrapati Shivaji Marg, Bombay; ( vi )St. Francis High School, Meena Nagar, Vasai, Thane; ( vii )St. Alloysis High School, Nala Sopara, Dt. Thane. 4. On 18-8-1989, a search and seizure action under section 132 of the Act was carried out at the residential premises of Mr. A.F. Pinto, trustee of St. Xavier Educational Trust. Simultaneously, survey under section 133A of the Act was also carried out at the office premises at Shiv Shakti Complex, Dahisar (East), Bombay, from where the adminis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 6,00,365 on account of expenditure incurred in running of the schools. Thus, the total income for assessment year 1989-90 was determined as Rs. 25,98,287. In respect of assessment year 1990-91, the total income was determined as Rs. 69,91,951 which included addition of Rs. 19,83,661 on account of unexplained payments made to Mr. Champaklal Dave and Mr. Balan and Rs. 7,80,414 on account of unaccounted donations received by the assessee. The total income also included the sum of Rs. 11,70,622 being the donations recorded in the books of assessee. 7. Both these assessments were challenged before the Learned CIT(A) before whom it was argued that ( i ) statements were recorded under duress and the same were retracted subsequently, ( ii ) income of the assessee-society was utilised only for the object of the trust i.e., education ( iii ) no personal benefit was taken by any of the members or office bearers of the assessee-society, ( iv ) the payments of the builders had been made for the purpose of school building which is also the object of the society, ( v ) money collected on account of sale of uniform, note books, ties, badges, etc., did not belong to the society and the col ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... un by the assessee-society. 9. Regarding exemption under section 11 of the Act, the Learned CIT (Appeals) noted that the Assessing Officer had not made any calculation about the income earned by the trustees out of the sale of uniform, note books, ties, badges, etc. He also noted that the Assessing Officer simply relied upon his finding given in the assessment order for assessment year 1989-90 in the case of St. Xavier Educational Trust. Accordingly, he directed the Assessing Officer to re-examine this aspect of the matter after bringing the following facts on record : "(1) The total amount received by the appellant-society on sale of uniform, note books, etc. from students. (2) No. of students to whom uniform, books, etc. have been sold. (3) Name and address of the contractors who supplied uniform, etc. (4) The amount paid for uniform, etc. the contractors who supplied the same." In addition, he also observed at page 21 of his order that as donations were not voluntarily made but were in the nature of consideration for giving admission to schools, the same could not be considered as income derived from property held under trust for the purpose of section11 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was also directed to verify the correct amount paid to Mr. Champaklal Dave over and above the amount of Rs. 15.64 lakhs. It was further observed that since the unaccounted donations had been considered as income of the assessee, then any amount of such donations paid for construction of building should also be considered as application of taxable income. For the similar reasons, he also restored the matter regarding addition of Rs. 19,17,161 pertaining to assessment year 1990-91, to the file of Assessing Officer for fresh adjudication. 13. Regarding the addition of Rs. 3.20 lakhs in respect of assessment year 1989-90 on account of unaccounted payment to Mr. Balan, it was submitted before the learned CIT(A) that such payment was made as donation to him as a trustee of St. Xavier Educational Trust which is also an educational institution and, therefore, should be treated as application of income for education purposes. The learned CIT(A) at page 33 of his order was of the view that donation not accounted for which is includible in the taxable income of the assessee as such cannot be considered as income from property held under trust and, therefore, any payment out of such taxabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pertinent to note that addition of Rs. 15 lakhs was also made on account of profit on sale of uniform, note books, ties, badges, etc. on the basis of the material found in the course of search in the case of St. Xavier Educational Trust. No addition was made regarding payment to Mr. Champaklal Dave. 16. These orders were again challenged before the learned CIT(A) who, vide common order dated 16-12-1996, following his order dated 9-12-1996 pertaining to assessment years 1989-90 and 1990-91 in the case of St. Xavier Educational Trust, held that assessee was entitled to exemption under section 10( 22 ) of the Act. However, no order was passed regarding exemption under section 11 of the Act. Regarding addition on account of donations received and accounted for in the books of account, it was observed by him that section 10( 22 ) provides blanket exemption to an educational institution in respect of any income and, therefore, no addition could be made on this account. 17. Regarding addition of Rs. 2.99 lakhs in assessment year 1989-90 on account of payments of Mr. Champaklal Dave out of unaccounted donations, he was of the view that in view of the blanket exemption under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure and fixture and other assets. 20. Aggrieved by the orders of the learned CIT(A) dated 24-1-1993, in the first round, the assessee has preferred the appeals before the Tribunal, while the revenue has filed appeals against the orders of the learned CIT(A) dated 16-12-1996 in the second round. Revenue has also filed appeal against order of the learned CIT (Appeals) dated 17-12-1996 pertaining to assessment year 1991-92. 21. Both the parties have been heard at length. The perusal of the common order dated 16-12-1996 of the learned CIT(A) reveals that exemption under section10( 22 ) of the Act has been allowed to the assessee for the reasons given by him in his order dated 9-12-1996 in the case of St. Xavier Educational Trust. It is conceded by both the parties that the said order was challenged by the revenue before the Tribunal. The Members who heard the matter in that case differed on the issue of exemption under section 10( 22 ) and the dispute was referred to the Third Member for his opinion. The Hon ble Third Member, vide order dated 30-9-2002 held that assessee did not exist solely for the purpose of education but existed for the purpose of profit and thus, was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years. This issue for assessment year 1991-92 would be dealt with at later stage. 23. However, it is pertinent to note that the learned CIT(A), in para 3.5 of his order dated 24-1-1993, gave specific directions to examine the availability of the exemption under section 10( 22 ) with reference to each school since he was of the view that each school run by assessee could be considered as educational institution. If the income of such school was applied solely for the purpose of education, then such income would qualify for exemption under section 10( 22 ). Such finding of the learned CIT(A), having not been challenged by the revenue, have become final. In the fresh proceedings, the Assessing Officer has simply rejected the claim of assessee following his finding in the case of St. Xavier Educational Trust. We are unable to uphold such action of the Assessing Officer. He should have examined the facts in respect of each school and then should have decided the issue of exemption under section 10( 22 ) vis-a-vis each school run by the assessee. On going through the assessment order for the assessment years 1989-90 and 1990-91, it appears that the Assessing Officer had considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ersonal use. As far as personal use by Mr. Grace Pinto is concerned, we find that it was unaccounted trust money which was used by her and, therefore, does not effect the claim of assessee in respect of schools. Though there is an allegation that services of the trust were utilized for sale of uniform, note books, ties, badges, etc., but it has not been proved on record in the case of present assessee. In assessment year 1989-90, the Assessing Officer himself has given a finding that no collection was made regarding uniform, note books, ties, badges, etc., and consequently, no addition was also made in the assessment. No doubt, the addition of Rs. 15 lakhs has been made on this account of assessment year 1990-91 but we find that such addition was made merely on surmises and conjectures. It is pertinent to note that no addition was made on this account in the original order of assessment for assessment year 1990-91. Even in fresh assessment proceedings, the addition of Rs. 15 lakhs has been made on the presumption that assessee might have made collections similar to the case of St. Xavier School. Such addition is impermissible in law and therefore the same has been deleted by us in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that mere surplus would not disqualify for claiming exemption under section10( 22 ) in view of the Supreme Court judgment in the case of Aditanar Educational Society ( supra ). 28. In view of the above discussion, we uphold the common order of the learned CIT(A) dated 24-1-1993 on the issue of exemption under section 10( 22 ). The common order of the learned CIT(A) dated 16-12-1996 is, however, set aside on this issue and consequently, Assessing Officer is directed to pass appropriate order in accordance with the findings given in this order. 29. The next question for our consideration is whether the assessee was entitled to exemption under section 11 of the Act in respect of assessment years 1989-90 and 1990-91. Since it has been found that the office bearers/members of the assessee-society were obtaining personal benefits out of unaccounted donations, there is violation of the provisions of section 13(1)( c ) of the Act. Hence, exemption under section 11 of the Act also cannot be allowed for these years. We may clarify that learned CIT (Appeals) had not adjudicated the issue regarding exemption under section 11 in his order dated 16-12-1996 but no purpose would be ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iform, note books, ties, badges, etc., and accordingly, no addition was made in that year. Therefore, it appears that, the addition in assessment year 1990-91, has been made merely on the basis of surmises and conjectures which is not permissible in law. No evidence has been brought on record to prove that any such activity was carried on by the assessee. Since the addition has been made on mere surmises, the same cannot be sustained. Accordingly, we hold that the learned CIT (Appeals) was justified in deleting the addition though for different reasons. 33. The next issue relates to addition of Rs. 2.99 lakhs on account of unaccounted payments to Mr. Champaklal Dave in assessment year 1989-90. This addition has been confirmed by the learned CIT (Appeals). In the absence of any arguments, the order of the learned CIT (Appeals) is upheld on this issue. 34. The other additions made by the Assessing Officer on account of payments to Mr. Balan and M/s. Poonam Investment Co. Pvt. Ltd. were not adjudicated by the learned CIT (Appeals) on the ground that these issues were subjudice before the Tribunal in the first round of litigation. Since the assessee has not argued on these issu ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
